Is Statoil Getting It Wrong in Iraq?

[English translation of an op-ed originally published in Norwegian in Dagbladet, Oslo, 14 June 2007. As of September 2007, no Statoil office has actually been opened in Arbil.]

Recently announced plans by Statoil to open an office in Arbil, the capital of the Kurdistan federal region in Iraq, raise several critical questions about the company’s ability to gauge the fundamentals of Middle Eastern politics.

It should however be clarified at the outset what this proposed office is really about. Statoil (Norway’s biggest oil company and soon to become even bigger through a merger with Hydro) is not considering signing any kind of exploration deal with Kurdish authorities. Statoil has repeatedly stated that it will not enter into any such deals in the absence of a judicial framework approved by the Iraqi parliament. Moreover, the projected Statoil mission in Arbil would have all of Iraq as its sphere of operation, not only the Kurdish areas. For example, among the components of the plan is a training facility for prospective Iraqi Statoil employees who would be recruited from all parts of the country. In this regard, a key argument in support of Statoil’s choice of location has been the considerable difficulties involved in arranging such training sessions elsewhere: internally in Iraq this would be troublesome due to the security situation; in other countries of the world it is simply proving increasingly difficult for Iraqis to obtain visas.

On all these counts, there are essential differences between Statoil’s plans and the Kurdistan activities of another Norwegian player, the miniscule and privately owned DNO – which openly entered into cooperation with Kurdish authorities prior to the adoption of the Iraqi constitution in October 2005. Nevertheless, there are numerous problematic dimensions to the scheme currently under consideration by Statoil, above all concerning potential side effects in internal Iraqi politics. Regardless of Statoil’s politically correct rhetoric (“an all-Iraqi office which just happens to be located in Arbil due to the security situation”), most Iraqis will interpret any such office as a preparatory step towards investments in the Kurdish areas – which in turn would make Statoil’s office part of the struggle about Iraq’s future state structure that is currently going on in committee charged with revising the 2005 constitution. Currently, the stalemate in the constitutional revision committee concerns the prerogatives of the central government, where the two Kurdish parties are resisting attempts by Shiite and Sunni Arabs to restore a modicum of authority for Baghdad. Lately, Kurdish politicians have protested vociferously against even modest attempts at consolidating the powers of the centre, preferring instead the current constitution which leaves Iraq with one of the weakest federal capitals ever recorded in the annals of political science – unable even to impose taxes and customs, control inland waterways, and administer civil aviation.

In recent years, the Kurdish parties have deliberately worked to improve their bargaining position vis-à-vis Baghdad. They have for instance approached Shiite leaders with the hope of converting them to the idea of a mirror image of Kurdistan in southern Iraq: a Shiistan. So far, their success has been limited. Despite much sensationalism in the Western press about various incarnations of “southern separatism”, on the whole – outside the Green Zone at least – ideals of Iraqi nationalism have proven remarkably resilient among the Shiites. Nevertheless, the overt attempts by Kurdish leaders to push the Shiites into a more pro-federal direction form a considerable problem in the process of Iraqi national reconciliation, because this has encouraged some Shiite leaders to embrace new and radical perspectives on federalism (such as the idea of a single Shiite federal entity) which in turn has led to friction with other Iraqis, Shiites and Sunnis alike, who have more traditional and sceptical attitudes to federalism. Among the symptoms of these ongoing processes are the Kurdish-led efforts seen in the first part of 2007 to define certain oil fields in southern Iraq as “undeveloped” and hence “open to foreign investment” – another reflection of a policy on the part of the Kurdish leaders to seek out potential partners among other Iraqis who may share their preference of a very weak central government. The problem is that many inhabitants in southern Iraq, including many employees in the oil sector, still adhere to the traditional vision of a unitary state with Baghdad as the undisputed capital.

This Kurdish strategy has included a component specifically aimed at Western companies: a deliberate attempt to maximise foreign involvement in the Kurdish areas. This is where Statoil would directly become a player in an internal Iraqi process. Naturally, until now the Kurds have preferred to negotiate for straightforward exploration deals with foreign companies, like the one already signed with DNO. But a Statoil “interest section” in Arbil would serve exactly the same goal: it would highlight the idea of Kurdish autarky, and would enflame tensions by encouraging Kurdish nationalist grandstanding in the ongoing debates about a revised constitution and a package of oil legislation. Statoil would thereby effectively emulate DNO in Iraq: it would create the same negative impact on the ongoing attempts at national reconciliation, even if the company’s spin-doctors have done a somewhat more careful job than their DNO counterparts. “Training components” and security advantages aside, the choice of location for the proposed Statoil office simply is not neutral with regard to the Iraqi constitutional debate. It is conceivable that Statoil may have been persuaded by Kurdish ideas about Kurdistan emerging as “the other [and more secure] Iraq”, but this argument collapses as soon as actual Kurdish behaviour in the ongoing political negotiations is taken into consideration. Increasingly, one gets the impression that Kurdish leaders think they can arrive at a state model in which the only ties with the rest of Iraq would consist of some kind of defence arrangement directed against Turkish incursions, as well as monthly payments to the Kurds from the southern Basra oil fields – estimated to be more than twenty times the size of the Kurdish ones. This kind of maximalist attitude represents a rather utopian approach to federalism, but it nevertheless remains popular in many Kurdish circles.

DNO’s choice to enter into this game must be seen against the backdrop of the small size of the company. But why should a serious player like Statoil do likewise? Cannot the company afford a waiting period in which the Iraqis themselves would decide their future state structure, without interference by foreign investors? Is not Statoil’s management concerned about possible side effects in the wider Arab and Islamic worlds, where much religious extremism is fuelled precisely by conspiracy theories about Western plots to divide and rule Iraq on a sectarian basis?

True, Iraq desperately needs foreign investment today. But first and foremost, the Iraqi attempts to create Iraqi solutions to the country’s political future must be supported. The scenario of state-sponsored Norwegian capitalist interests acting as a destructive force in Iraq’s reconciliation process is a thoroughly shameful one, and should prompt Statoil’s management and the Norwegian foreign ministry to urgently re-examine the whole idea of a Statoil office in Arbil.